Reliance Communications (RCom) on Monday said fair trade regulator CCI has given nod to its deal to acquire Russian conglomerate Sistema's Indian telecom unit, Sistema Shyam Teleservices Ltd (SSTL) that operates under the MTS brand.
"We wish to inform you that the Competition Commission of India (CCI) has approved transfer of telecommunications undertaking of Sistema Shyam Teleservices Ltd to the company," Reliance Communications said in a BSE filing.
As per the deal, SSTL will hold about 10 percent stake in RCom and pay off its existing debt before closing the deal. Russian tycoon Vladimir Evtushenkov-controlled AFK Sistema currently holds 56.68 percent stake in SSTL while the Russian government owns 17.14 percent interest. Shyam Group has 23.98 percent stake and the rest is owned by small investors.
SSTL offers mobile telephony services under the MTS brand across nine telecom circles in the country. The deal will give RCom access to spectrum or airwaves in the 850MHz band that can be used for 4G services which it plans to start by the year-end.
Also, it will be able to extend the validity of its licence by 12 years in eight high revenue-generating circles of Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West), and West Bengal.
While SSTL will pay off its existing debt, RCom will assume the liability to pay the government instalments for SSTL's spectrum, amounting to Rs. 392 crores per annum for the next 10 years.
Sistema had ventured into the Indian telecom space in 2007 when it bought 10 percent stake in Shyam Telelink by paying $11.4 million (roughly Rs. 78.1 crores). The stake was raised subsequently. The merger will not just help RCom compete with the existing players but consolidate its position ahead of Mukesh Ambani's foray into the sector with 4G services under the Reliance Jio brand later this year.